Thursday, September 17, 2009

Mary Travers, one of my son's all-time favorite singers, passed away on Wednesday from complications of chemotherapy for a bone-marrow transplant she had after being diagnosed with leukemia a few years ago. Her passing leaves yet another huge void for many of us who grew up in the '60s and '70s. Ms. Travers was 72 years old.Article

Tuesday, September 15, 2009

The lawyer, the hooker and the tax deduction

Say this about New York attorney William G. Halby: He's pretty darn ballsy.

As recounted in a U.S. Tax Court case decided Monday, Mr. Halby in 2004 claimed a $65,934 tax deduction for his use of prostitutes and a $2,368 deduction of sundry books, videos and pornographic magazines. For 2005, Mr. Halby claimed $5,005 worth of deductions for books, videos and pornographic magazines and $42,152 for prostitute services.

There was no explanation for the fall-off in commercial sex use.

As noted in the Expatriate Owl blog, Mr. Halby had previously lost a state tax case over similar issues. Nor did the IRS did not look kindly on the medical deductions. As U.S. Tax Court Judge Joseph Robert Goeke noted:

"Petitioner did not visit these prostitutes as part of a course of therapy prescribed by his doctor, nor did petitioner ask his doctor to prescribe any sort of sex therapy. Petitioner kept track of these visits in a journal. The journal included the date, the name of the “service provider”, and the amount. Petitioner did not discuss these visits with his doctors afterwards to determine their impact on his health."

Mr. Halby nonetheless argued that he should be able to deduct expenses because of the health benefits associated with a good sex life. The judge, though, reasoned that a tax deduction can't be allowed for an illegal activity -- frequenting prostitutes -- nor for porn that wasn't prescribed by a therapist. Stated the judge:

"Petitioner has been an attorney for 40 years and specialized in tax law. Petitioner should have known that his visits to prostitutes in New York were illegal and that (regulations and)...caselaw do not support his claimed deductions. Accordingly, petitioner is liable for the (tax) penalty."

Accordingly, Mr. Halby is on the hook for a $21,491 tax deficiency and a $4,298 penalty.

The U. S. Department of Homeland Security, with the cooperation of the U. S. Small Business Administration, the U. S. Department of Health & Human Services, and the Center for Disease Control and Prevention, has issued a Guide for Small Businesses to prepare for the spread of H1N1 influenza. It is a short booklet, and it is applicable to far more situations a small business faces than just the H1N1 flu. It also has a section containing tips for the individual. Small business owners and their attorneys should review this booklet and take appropriate action. Copies can also be printed out and distributed to employees.

Friday, September 11, 2009

Healthcare industry groups generally agreed with President Barack Obama that the status quo on the current healthcare system was not sustainable, but offered differing views on how the system should be fixed.

Insurance regulation was a chief focus of the president's speech on Wednesday night. Obama said that a government-run public option would be a way to get insurers to lower costs. In a written statement, Karen Ignagni, president and CEO of America's Health Insurance Plans, reiterated the organization's longtime position that a public plan was not the solution to improving coverage. “New health insurance reforms and consumer protections will solve the problem without creating a new government-run plan that will disrupt the quality coverage that millions of Americans rely on today,” she said.

“America's hospitals stand ready to do our part to extend coverage to more Americans and to continually strive towards providing high-quality care for patients that is more efficient and affordable,” said Richard Umbdenstock, president and CEO of the American Hospital Association, in a written statement. The AHA continues to have concerns on how a public plan would be constructed, but is “glad to see that President Obama is open to exploring other ideas that would help us achieve our shared goal of universal coverage.” --Jennifer Lubell

Paul’s Comment:Why has the insurance industry not already put into effect those “insurance reforms and consumer protections” that Ms. Ignagni finds acceptable?Since it takes an earthquake-sized shift in electoral politics to move Congress to enact fundamental reforms, if Congress doesn't enact some type of public option now, will there ever come another time when Congress will adopt a public option before it is too late?

Section 1004 of The American Recovery and Reinvestment Act ("ARRA") made several changes affecting college expenses and tax credits for the 2009 and 2010 tax years. Tax-free distributions from 529 plans are expanded, and the Hope Credit for college expenses are significantly broadened.

While contributions to 529 plans are not deductible for federal income purposes, distributions from 529 plans are tax-free, if they meet certain criteria. The ARRA adds computer technology and equipment or Internet access and related services to the list of expenses that qualify for tax-free treatment. The existing list of qualified expenses include tuition, required fees, books, supplies, equipment, special needs services, and, if the student is at least a half-time student, room and board.

The Hope Credit can now be used for a student's first four years of college, rather just the first two years. The ARRA also increases the maximum amount of the tax credit to $2,500; increases the income limitations to qualify to $80,000 of modified adjusted gross income for individuals and $160,000 for "married filing jointly" with a phaseout for taxpayers with higher incomes; adds books to the allowable expenses; and, in some cases, allows up to 40% of the credit to be refundable.

Note: For some families, generally at the higher end of the tax brackets, it might be more advantageous for the student to file his/her own tax return to get a tax refund because of this refundable credit. Check with your tax advisor about this issue.

Tuesday, September 8, 2009

Like virtually every President in recent memory, President Barack Obama came to Washington with one of his stated goals being to emphasize bi-partisanship. In more colloquial terms, President Obama seemed to be a lover, not a fighter. But the time to fight, every President learns, is now. Except that some Presidents learn this lesson too late to be an effective President.

Everytime President Obama has talked about bi-partisanship, the Republican leadership has kicked him in the teeth. They have no interest in bi-partisanship. They want the stimulus package to fail. They want health care reform to come to naught. They are desperately looking for campaign issues for 2010 and 2012. They are interested in returning to power only for power's sake, not for the sake of the country.

It's time President Obama jettisons "bi-partisanship" and goes about the business of governing. He may need the votes of two or three Republican Senators to get health care reform passed, but that is not bi-partisanship. It is simply cobbling together a viable majority to get critical legislation passed. If the cost of getting health care reform legislation passed is watering down the proposal to get 70%, then do it.

Democrats never seem to get the message. There is no purity in politics. When Hubert Humphrey was not pure enough for many Democrats, we got Richard Nixon as President. When Jimmy Carter wasn't great enough, we got Ronald Reagan, then George W. Bush. It's time for progressives to lead the way, picking up support where possible; sacrificing perfection where necessary.

Lyndon Johnson understood the need to get important legislation passed. When he proposed his War on Poverty, a Commission studied the issue and suggested that it would take about $30 billion dollars to do it right. All President Johnson could get out of Congress was $5 billion. While this was a prescription for failure, he took what he could get, and we are better off for it. The "War" was lost in the first days, but we did get Head Start out of the ashes. What a wonderful gift to the country. We may not have gotten all of the community organizing we needed to make the War successful, but we got some very treasured programs and principles that have proved successful and long-lasting.

It's time for President Obama to "break some eggs." He needs to get significant health care reform passed this year. It doesn't have to be perfect; it just has to be real reform. Mr. President: Your Presidency and the country hang in the balance. The time to act is now.

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